Daybreak Weekend: Nvidia Earnings, Europe Airlines, Japan GDP

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1:55Learn more at thehartford.com slash risk mitigation. Bloomberg Audio Studios. Podcasts. Radio. News. This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world. Straight ahead on the program, a look ahead to earnings from chip giant NVIDIA, along with some of the biggest U.S. retailers. I'm John Tucker in New York. I'm Caroline Hepker here in London, where we're looking at the upcoming earnings test for Europe's low-cost airlines. I'm Doug Krisner, looking at whether Japan's economy will show improvement in the first quarter.

2:37That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App.

3:01And good day to everybody. I'm John Tucker. Let's start today's program with the company founded in a Denny's restaurant in East San Jose, California, Wednesday after the close of regular trading. The biggest company, NVIDIA, opening its books to investors. Let's get a preview and walk you through all the details. We're joined by Bloomberg Technology co-anchor Ed Ledlow. Ed, I've got to start with a China question. which of NVIDIA's future results are going to reflect purchases from China? Nobody knows. That is the great— That's why we bring you on board, Ed. That is the great mystery and mystique of NVIDIA, because, you know, for all the headlines and the discussion of what NVIDIA can or cannot sell to Chinese companies, you know, with Jensen Wang alongside President Trump in China, there's a big misunderstanding of how it actually works.

3:54So like the U.S. government will say we have approved NVIDIA to sell a certain generation of chip to a certain group of Chinese companies. Great. Fantastic. And Jensen Wang will go on stage, as he's done many times in 2026 so far, and say, good news, guys. Like we have orders from Chinese companies for the H200, which is the generation of chip they're permitted to sell. Really good, like real orders. And so as a result of those orders, we're going to ramp up. We're going to go to our suppliers, make sure that we have those chips. But nobody actually knows if China's OK with this. And, you know, it's really interesting because to his credit, Jensen Wong has always been really consistent with me when I've discussed it with him.

4:35When they negotiate this stuff, they don't actually themselves negotiate with the Chinese government. If Chinese tech companies are allowed to buy their chips, they will. They'll place orders. and that we should infer from that means that the Chinese government said it was okay. And so the only way of knowing is if it shows up on the income statement. That's the joy of covering earnings in public companies. It's either there in black and white or it's not. Yeah, you know, it's kind of hard for me when I go home in the afternoon, said to pass someplace that doesn't have a data center under construction.

5:11Where's the growth going to come from for NVIDIA? Is it those data centers that are popping up seemingly everywhere? Well, look, I really want to have some fun and make this just digestible for the audience. All you need to know is that wherever it's coming from, the NVIDIA numbers are really big. This story, you mentioned Denny's, right? In April 1993, when this company was founded in Denny's, I was less than a year. And for most of the company's initial history, it made chips that powered video games consoles. and no one really cared those were like the gpus we could work right yeah gpu the origin of the gpu the graphics processing unit is that it's very good at running multiple computations at the same time which for the layman means when you're playing a video game all those pixels appear on the screen you know that's what its origin was now fast forward to present day you know they are still growing revenues at near to 80 percent year on year you know actually what we'll see is revenue growth accelerate into this quarter.

6:14Their margins are at 75%. Margins at 75 % for a company that sells chips, it's just bonkers. It's just nuts. That's all you need to know. And they do it with massive profits and cash generation. And so in this quarter, that's not changing. But here's to answer your actual question, where does it all come from? It's still the big cloud computing companies, what we call hyperscalers, that account for more than 50 % of those revenues. But that's why the timing of earnings is really interesting. If you're a real nerd like me, you look at the calendar, and you're like, oh, wow, NVIDIA reports earnings May 20th.

6:50But the reason that I stress that is that all of NVIDIA's biggest customers have already done earnings, and they've told us how much they're going to spend on chips this year. So it all is kind of logical, and it all results in NVIDIA winning, frankly. Is it still safe to say NVIDIA pretty much has a near monopoly in this field? Yeah. Well, just to make sure that we're covered and I adhere to my own and Bloomberg's high standards, a technical monopoly is where you have more than 70 percent market share. And what's happening in AI right now is a very big shift from a period of time where all of the computers and we're talking about computers, right?

7:32GPUs, clusters, data centers, what you're talking about is absolutely ginormous computers. And until this point, what those computers were largely doing was training the models, taking really vast volumes of data and training models on that data. Now people are using them. They're running the models either through prompts that generate a text response. It can be an image response. That's what we call inference. And when we get to that inference phase, NVIDIA looks over its shoulder a little bit more because there are more custom silicon. Different cloud companies have their own chips. There are other chips on the market that would claim to be better than Nvidia's in that sense.

8:12But there's not yet any evidence that they've sort of had their market dominance chipped away at by any of these would-bes. You're going to pour over those earnings as they come across Wednesday after the close of regular trading. Our thanks to Bloomberg Technology co-anchor Ed Ludlow. Let's take a look now at some of the stocks making news in the week ahead. I'm John Tucker, along with Isabel Lee, the Bloomberg Cross Asset Reporter. The parade of earnings continues, and we're going to start with the biggest retailer in the world, Walmart. What's the expectation there? Walmart, ticker WMT, earnings will be on May 21st.

8:50That's a Thursday, which I checked right before we came on because you said we have to know the day. It's Thursday, 7 a.m. ET. Earnings call is 8 a.m., so early wake up if you really want to know more about Walmart. Revenue expected consensus estimates is$748 billion. Adjusted diluted EPS,$2.93. And diluted EPS,$2.93. So I could bore you with the numbers. But key themes to watch, definitely market share gains. We know Walmart is positioned to benefit from its value and convenience proposition with sustained e-commerce momentum. Maybe not in New York. I really can't relate whenever I talk about Walmart.

9:29Yeah, you know, it's just like I would love to go to Walmart. I've never been to one. Oh, my gosh. They're not around here. I think I may have been to one, or maybe I'm making it up. Which makes us more than qualified to talk about them. Yes, it's a once-in-a-lifetime thing for me. I would love to go to one. You and I can go on a field trip. There we go. There we go. We can expense it. Now, when I talk about Walmart, I said the world's largest retailer, but it's also the world's largest grocery chain, too, right? It is. A lot of people shop there. So according to Jennifer Bartes-Huss of Bloomberg Intelligence, she's going to be looking at online profitability.

10:05They're going to see whether e-commerce margins have improved. Same-star sales, annual revenue gains of 4 % to 5 % are anticipated. And of course, you're going to see consumer health. I mean, we have all heard this. Yeah, this is kind of a bellwether in terms of economic performance for, do I dare say, the lower-end consumer. Yes. So you're going to see that. And we've heard time and again in all the radio shows the K-shaped economy. I just read again a note today that travel is going to see heightened K-shaped economy. And I thought, obviously, I mean, the higher income will be in private jets and I will be in economy.

10:39You know, so. Okay. Let's move on. This is one store I have been in. I actually bought an Anderson window there. It's expensive. But I'm talking Home Depot. One of the things I'm seeing more and more at Home Depot, more and more like professionals, carpenters, whatever, show up. And it's not just, you know, people like bozos like me. So, okay, Home Depot, ticker is HD. You are not a bozo. But I think Home Depot is the kind of place that... You're welcome. I think it's the kind of place that you just have what you... If you need something, it's there. Because I go to Home Depot, guess for what?

11:19plans. Really? Yeah, they have plans. See, you never notice because that's not what you need. I never noticed the carpentry because I live in a tiny New York apartment. But Home Depot is also going to report earnings May 19. That's a Tuesday. Oh, this is even earlier. The release will be at 6 a.m. ET. Earnings call will be 9 a.m. So you can have breakfast in between. Revenue expected is$178 billion. Adjusted diluted EPS is$16.31. Gap diluted EPS,$15.98. And net earnings,$16 billion. So again, key themes to watch here. Also, consumer confidence. I mean, uncertainty around inflation and job security has really, I guess, deterred people from making large home improvements.

12:06Why will you remodel your kitchen when you think you're going to get paid off? Well, the other thing is the mortgage rates and what, the 10-year going up? The 30-year, the long bond, that was hovering right around 5%. with the latest economic figures. That feeds through mortgage rates, home expenses. 100%. That's a great point. And I think another key theme to watch is we have management indicating they've learned to manage tariff. So we'll see how that plays out. I feel like tariff, we kind of forgot about it. When I say forgot, like new headlines have kind of dominated the market, but it's still very alive and well.

12:41Okay. Let's finish up with the last stock on your list. And I'm just hoping there's some intersection between artificial intelligence and John Deere. I mean, they're building all these data centers everywhere. They are. And Deere makes stuff that you can build data centers with, like tractors and stuff like that. I guess, yeah. That's true, actually. You're poo-pooing my idea. No, that's true. Ticker is DE. They have earnings also made 21 Thursday, 6 a.m. Earnings call is 10 a.m., so you get a longer breakfast in between. Net sales is estimated to be$41 billion. Total revenue,$47 billion. Net income,$4.8 billion, et cetera.

13:22So they're expected to post a better-than-expected full-year 2026 results. Again, to your point, it's driven by maybe agricultural equipment makers and the momentum in building construction. Well, you know, the farmer, you know, we call it farmageddon, what's happening on the farms right now. Well, yeah, no, it's been a very difficult time, especially with the tariffs and the planting season. So, you know, again, deer is something of a bellwether for the U.S. economy. Yeah. Tariff also, you're right, is a key risk in used inventory overhang because there's an elevated used tractor inventories which continue to weigh on new equipment demand and pricing.

14:01I guess, where do you store these things? They're so gigantic. And they're, trust me, they're expensive too. I can imagine. I know from firsthand experience. Wow. Isabel, thank you for showing up today. Appreciate it. Isabel Lee is our Bloomberg cross-asset reporter. Coming up on Bloomberg Daybreak Weekend, we're going to take a look at the upcoming earnings test for Europe's low-cost airlines. I'm John Tucker, and this is Bloomberg.

14:40Active ETFs aim to beat the benchmark, while passive ETFs just settle for them. Embrace an active strategy that helps you build stronger portfolios. Invest with a global leader in active fixed income ETFs with JPMorgan Asset Management. Visit jpmorgan.com slash get active to learn more. JPMorgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication is issued by JPMorgan Distribution Services, Inc., member of FINRA. On June 10th, Bloomberg Invest is back in Hong Kong. We look at the role Hong Kong plays between China and the world as major powers compete and markets realign.

15:19As global investors rethink risk, we'll explore the forces driving Asian demand and the future of private capital. Catch exclusive interviews with top newsmakers, plus a live recording of Bloomberg's Odd Lots podcast. Visit bloomberglive.com forward slash invest Hong Kong to learn more. Supporting sponsor Deutsche Bank. This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm John Tucker in New York. Up later in the program, we're going to look ahead to some key economic data in Japan. But first, Europe's largest low-cost airlines report earnings in the coming days.

15:58And this comes against a backdrop of rising uncertainty in jet fuel costs driven by the war in Iran. Let's get more now from Bloomberg Daybreak Europe anchor Caroline Hepker. John, we will get into an uncertain airline business as we approach peak travel season here in Europe. Willie Walsh, the industry veteran, the director general of the International Air Transport Association, has warned recently that airlines can't keep absorbing the additional costs that they're seeing. The war in Iran, which began in February, has upended the industry. London's Heathrow Airport, one of the major hubs in Europe, reported a drop in passenger numbers in April of 5.3 % from a year earlier.

16:40That's down to 6.7 million passengers as the Middle East war has disrupted global air travel. The airport's CEO called it, though, a short-term disruption. Now, Bloomberg Intelligence forecasts that the big European carriers like IAG and Air France KLM are going to see their fuel costs go up by 27%. For Lufthansa, that figure is 22 % for 2026. So creating a big challenge for profitability. Others cast doubt on the risk of jet fuel shortages, seeing them as an excuse to cut unprofitable flights. Of the low-cost carriers reporting in the next week or so, Ryanair is relatively well protected by fuel hedging, but it remains exposed to potential supply disruptions and pressure on consumer spending.

17:35EasyJet, meanwhile, has warned that the war in the Middle East will widen its first half loss and weigh on summer demand. Overall, investors will be watching very closely for further cuts to full-year guidance, for both of these airlines. Well, joining us now is Danny Lee, aviation and transport reporter based in Asia. Danny, good to speak to you. How much is air travel currently being affected by the impact of wars? Well, Caroline, the airline industry is grappling with more than doubling in fuel costs. And the counting of that cost is resulting in multiples of billions and higher fuel bills.

18:18And right now, we've only seen a fraction of that be reported by the airline industry through at least one month of earnings that has filtered through. But it's now into the second and the third quarter, where we are seeing the volatility and the surge in jet fuel costs, which is absolutely wrecking airline balance sheets across the piece. And in particular, when you see airlines grappling with higher fuel costs, they are now thinking about how they can to mitigate those losses, in particular, having to cut the number of flights they operate, because simply there are flights out there which are just not profitable.

18:54So there is a balance to be bought between operating profitably and being generally conservative in how they approach this ongoing war we have seen stretching into almost three months now. And this is a challenge for airlines. How do they grapple with a surge in fuel costs? And when they have to pass on, the airlines have to pass on the costs onto customers, how much are passengers willing to bear? And this is a challenge for airlines to figure out. And particularly if you're a low-cost carrier, where you are trying to stimulate demand with lower prices, all of a sudden those prices become a lot higher.

19:32Yeah. So then what do we expect to hear from Ryanair and EasyJet in terms of their results? because they are obviously the big low-cost carriers in Europe. Yeah, EasyJet has already braced investors for bad news. So the UK low-cost carrier expects a headline loss of between£540 to£560 million. It tends to be the weaker period, those first six months of the year. And it's the earnings period which captures only a month of the Iran war. But so far, the airline says it has added£25 million to its fuel bill. So as that volatility in JetFuck does settle down a little bit, it's still going to be more than counting the costs.

20:12That doubling of cost of pressure is only going to be felt in the later quarters. And I think it's that kind of clarity from CEO Kenton Jarvis, which will be able to understand just what impact the Iran war is having on the likes of the local carriers and EasyJet in particular, because they just cannot pass on the full amount of higher jet fuel costs onto price-sensitive passengers. So I think the key question is, how much is that down arrow story going to extend into its kind of forecast in the future? And how will it be able to recoup as much of the fares as it can? Clearly, airlines are not able to do that so much in the near term, but it's towards the later end of the year that they will be able to.

20:57As for Ryanair, it will post its full-year earnings, and it has already guided towards a very healthy profit off tax of€2.3 billion. But Ryanair has been cautious in the large about its full-year targets, and whether its fiscal year ahead will change materially in terms of how it's thinking about demand, the amount of flights it operates, and even being able to carry as many passengers as it can. However, just like with EasyJet, Reiner, they may well be beneficiaries from the war in as much as the fact that passengers may not choose to fly long haul because of the costs and because of various other risk factors and may stick to Europe.

21:40So this could still be an upside momentum when people think about booking their travels this summer and beyond. Yes, I think that's really interesting. I mean, consumers in many parts of the world are under a lot of pressure, aren't they? So what do you think the airlines are going to say about summer bookings as consumers are facing higher petrol prices, inflation affecting lots of goods that they might be buying, including holidays? Well, the airline industry, by and large, has seen that level of demand keep up with pace. And so airlines are seeing booking levels largely about the same. However, EasyJet has warned that the conflict situation has resulted in a kind of denting of bookings momentum.

22:30So they are seeing a little bit of a hit, EasyJet. And I think the question is, does that continue? So that'll be very key for the CEO, Kenton Jarvis, to spell out. But also that kind of elasticity, really, the ability for customers to be willing to pay more for airfares. because ultimately the higher oil prices doesn't just affect airfares, it affects a whole facet of the economy and for households from goods to services, particularly into the shopping baskets. So that extra cost is coming everywhere. And I think people will be thinking about what do they prioritise in spending in the near term.

23:08What is the state of jet fuel supplies? Are the shortages real? Are they particularly affecting Europe? I know where you are in Asia, it's been a very pointed issue. Yeah, the jet fuel shortage is still a live and real issue. We've heard a lot from airlines talking about being covered in jet fuel needs for March, April, May into June. But there is limited visibility. And given the Straits of Hormuz is still largely locked to an extent a key critical waterway, away. There's been a lot of scrambling to find alternative sources, particularly from the US. We haven't really heard too much more in terms of deep concerns that airlines have.

23:56We already have seen airlines start to cut schedules just to make sure that where there are more challenged airports where fuel supply may be a question, they will focus on higher priority bookings and and airports where there is bigger business. I don't think we've seen too much more in terms of shortage concerns out there. But as we get into the peak summer season, that dynamic may start to change a little bit more. But clearly, Europe and Asia are the big areas to watch when it comes to fuel availability because of the reliance of the imports of jet fuel. What about the cost of flying? We know that consumers are thinking about this.

24:38If you look at surveys of consumers, what are we actually seeing in terms of ticket prices? Well, ticket prices are going up by and large. And some industry surveys point to a doubling of airfares. And even in the recent months, so into May and June, that airfare is about 50 % higher from then last year because of what we have seen with the around war impact on jet fuel prices, on the disruption in demand because of the impact in the Middle East. So there is seeming a tendency that airfares will stay higher for longer. Not great, but at the same time, airlines still feel fairly optimistic in the near to longer term or midterm about passengers still willing to travel, that level of demand out there.

25:33And so therefore, we are still seeing airlines looking at expansion. And so therefore, that level of expansion will feed into stimulating more bookings. However, there is still that challenge of filling those flights at those relatively higher prices. And I think airlines are still going to be grappling with that level of price sensitivity overall, because at some point, passengers will say we're not going to be paying this price. and whether they try to look for a cheaper alternative or just not fly at all or delay their travel, it remains a big question as we move into the latter part of the year.

26:08What do you think might come out of this energy kind of impact? Do you think there'll be fewer airlines, fewer routes? Is that too simplistic? There may well be a consolidation. We are already seeing consolidation. That has been the case pre-war, particularly in Europe, Asia and in the US. But as the cost of offline becomes more expensive for airlines, we have already seen the likes of Spirit Airlines go down. Will there be others? It's still too early to tell to see which airlines may not survive at this stage. But there is a very much concerted effort to see airlines which have a better war chest, who are better capitalized, are looking at taking advantage of weaker airlines.

27:00And as a result, we may see consolidation. We may see some trimming as a result. But I think airlines overall, where they have the opportunity to make money and it still does, and they can have that overall connectivity within their network of flights, they will all stick around. And overall, that level of competition will become even more intense as the stronger airlines look to become even stronger. Danny, very interesting. Thank you so much for your time. Danny Lee is aviation and transport reporter here at Bloomberg based in Asia. My thanks to him. And of course, we'll have more coverage of Ryanair's results due on the 18th of May and EasyJet's earnings on the 21st of May on Bloomberg Radio and across our platforms.